Stock Market News

FX round-up: Sterling at highs of multi-year trading range

Old habits die hard. Traders again pushed the euro and sterling higher, despite expectations for action from the European Central Bank (ECB) in coming months and the well telegraphed reservations of the Monetary Policy Committee (MPC) in regards to excessive strength in the pound.

That came in the aftermath of Wednesday's Inflation Report in the UK and new Fed Chair Janet Yellen's policy speech last Tuesday.

Also contributing to yesterday's move, US retail sales slipped by 0.4% over the month to reach $392.3bn according to the latest figures from the US Department of Commerce. The consensus estimate had been for an unchanged reading.

"Some of the weakness in retail sales in January was probably due to the bad weather. Nonetheless, it looks as though GDP growth in both the fourth quarter of last year and the first quarter of this year could be a little weaker than we previously thought," wrote economists at Capital Economics.

Back in the Eurozone, all eyes were on the political situation in Italy.

Italy's centre-left party leader Matteo Renzi called for a new government to take power amid pressure on Prime Minister Enrico Letta to step down.

Analysts at RBS believed he was more committed to reforms than the current administration in Rome.

Lastly, in a BBC Radio 5 interview on Thursday morning the Bank of England's Chief Economist, Spencer Dale, said that market forecasts for the Bank Rate to remain on hold until around spring next year, and then rise to around 2% by the end of 2016, are "reasonable".

First thing Friday some media outlets were calling attention to the elevated levels reached by sterling.

Purely from a trading perspective, analysts at Commerzbank seemed non-committal in either one direction or another on the most likely path for 'cable' over the coming sessions, and a tad wary.

"GBP/USD has charted marginal new highs for the year. The market is approaching tough long term resistance at 1.6657/1.6745 inter-year pivot line and the 200 month moving average. Some caution is warranted - we have a TD perfected set up on the weekly chart, a 13 count on the daily chart and TD resistance circa 1.6790. We also note that the new high has not been confirmed by the daily RSI."

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